Facebook wins case over network that tried to replace its ads over Facebook’s

U.S. District Judge Cathy Ann Bencivengo concluded a legal spat between Facebook and Sambreel over the third-party ad company’s controversial advertising practices, Gigaom reports. Bencivengo ruled in favor of Facebook and threw out Sambreel’s antitrust case, claiming “There’s no fundamental right to use Facebook.”

Sambreel’s troubles began when its third-party Facebook product, PageRage, enabled users to change their Facebook backgrounds and layout. To accomplish this, Sambreel required these very Facebook users to download its software, but at the same time the product was serving ads that would replace Facebook’s own. Facebook was being threatened by Sambreel’s advertising network, which grew to become the third largest after Facebook and Yahoo for serving “89 billion display advertising impressions.” While the relationship between Sambreel and Facebook allegedly began as friendly, PageRage’s growth become a thorn in its side.

According to the judgment documented by the U.S. District Court in California and published yesterday, Sambreel was raking in more than $1 million per month in revenue during 2010, and that was with just one million users. By mid 2011, PageRage had amassed four million users per day, which threatened Facebook’s own advertising products on its own platform.

Facebook eventually took matters into its own hands when the social network began blocking users who had PageRage installed from signing into their Facebook account. Within two weeks of this, Sambreel claims that it lost more than one million users, and Facebook gave the advertising company its terms: Sambreel would have to eliminate its advertising efforts on PageRage to keep the product active. Sambreel complied on December 22, 2011 but suffered a loss of half its workforce and other financial losses.

Sambreel argues that Facebook’s advertising scheme is anti-competitive, even monopolistic.

However the court found that Facebook was within its right to protects its own products and terms of use. Specifically the judgement states: “The Court is persuaded that Facebook has a right to control its own product and to establish the terms with which its users, application developers, and advertisers must comply in order to utilize this product.” But the real home run for Facebook in this antitrust complaint was the judge’s conclusion that Facebook never prevented Sambreel from “developing products on other websites, or social networks.”

The case could serve as a precedent for January 5’s court case involving Twitter and PeopleBrowsr. It also brings to mind MegaUpload’s Kim DotCom’s Mega, a free-to-use music service, which was reportedly going to be replacing ads on third-party sites with Mega’s own ads in a manner that’s similar to what PageRage was doing. Although with Mega’s advertising product, no one specific platform will be targeted. Still, Facebook’s victory doesn’t bode well for the already-beleaguered music service.